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Modest Belly- To Long-Led Rally On Softer European PMIs

US TSYS
  • Cash Tsys hold a modest rally, triggered by softer than expected European PMIs with the reaction led by 5-10Y tenors. 2s underperform with some relative stickiness ahead of Wednesday’s FOMC decision (implied rates out to Dec are unchanged on the day) along with today’s 2Y auction.
  • 2YY -0.6bp at 4.831%, 5YY -3.2bp at 4.061%, 10YY -2.9bp at 3.805%, 30YY -1.7bp at 3.880%.
  • TYU3 trades just half a tick off session highs of 112-14+ (+00-7) under subdued volumes of 225k. It has cleared Friday’s high but is well within Thursday’s range that was helped wider by initial claims coming in lower than expected. Support remains at 112-00 (Jul 20 low) whilst last week's 113-08 high is watched for a resumption of the recent bull cycle that could ultimately expose 114-00 (Jun 13 high).
  • The combination of preliminary OI data and price action indicated that TU futures saw fresh shorts added, while FV, TY, UXY & US futures saw shorts cut.
  • Data: Chicago Fed Nat Activity Index Jun (0830ET), S&P Global US PMIs Jul prelim (0945ET)
  • Note/bond issuance: US Tsy $42B 2Y Note auction, (91282CHN4) – 1300ET
  • Bill issuance: US Tsy $65B 13W, $58B 26W Bill auctions – 1130ET

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